Going to brink on debt ceiling

Republicans got a clear political boost in the battle over the debt ceiling Monday when Standard & Poor's lowered its outlook on the U.S. debt to "negative." House Republicans pounced on the news as proof that Democrats are wrong to push a "clean" vote on raising the debt ceiling without also coupling it with long-term spending cuts.

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But another piece of important news has largely gotten lost. The Wall Street Journal reported over the weekend: "During a recent series of meetings and fundraisers, top Wall Street executives and lobbyists have urged Republicans to resolve the debt ceiling debate quickly or risk turmoil in the bond market.

"In the sessions, House Speaker John Boehner explained the politics of the vote to investors, telling them Republicans won't approve an increase in how much the U.S. can borrow without a long-term deficit reduction plan, according to people familiar with his remarks. In turn, the executives said delaying a resolution could unnerve skittish credit markets."

It's big news that business leaders have urged Boehner to hurry up and get this resolved, lest the standoff unnerve markets. But Boehner is telling them that the GOP is standing firm in its quest for a long-term plan for cuts. Keep in mind that this goes considerably further than last week's Politico reporting, which only alluded to one or two warnings from executives. The Journal paints executive anxiety as a far broader phenomenon.

Boehner spokesman Michael Steel, recounting Boehner's private conversations with executives, told the Journal: "Boehner has said exactly the same thing privately that he says publicly: The American people will not tolerate an increase in the debt limit without addressing the reasons it needs to be raised by cutting spending."

Last week I reported that Democrats hope to use the debt ceiling as a wedge issue against the GOP. The goal is to divide the GOP's Wall Street supporters, who think the party's brinkmanship with the debt ceiling is endangering the economy, from the tea party base, which wants Republicans to use the debt ceiling as hostage to extract more spending cuts. Republicans argue that the S&P story shows that Democrats, too, are engaged in their own form of risky brinkmanship — over whether we are going to reach a long-term agreement on spending cuts. They add that Democrats, too, take a huge amount of corporate cash.

The S&P story seems to have given Republicans momentum in the spin wars over the debt ceiling. While Treasury Secretary Timothy Geithner said this weekend that GOP leaders had assured him that they understood the need to raise the debt ceiling, Democrats don't seem to be drawing as hard a line on a "clean" vote as they might have. The moment for doing that convincingly may have passed. A compromise in which Democrats agree to some sort of spending-cut framework appears likely. But the fact that the GOP's brinkmanship is rattling business leaders — including, apparently, the party's corporate benefactors — should be part of the discussion.